Countering counterfeits

Release date

19 May 2010

By Alan Boaden, Head of Currency, Reserve Bank of New Zealand

There were several news media reports in April about counterfeit bank notes
found in Auckland and some other locations in the North Island. The incidence
of counterfeiting in New Zealand is very low by international standards. The
fact that the recent counterfeits were regarded as newsworthy is itself evidence
of the rarity of forged currency in this country.

The recent counterfeits do provide a reminder, though, that criminals do
attempt to pass forged currency. A person who accepts a counterfeit note has
effectively been robbed. A counterfeit note cannot be used to buy anything or
be cashed at a bank. Any individual found guilty of making or using counterfeit
currency can be fined up to $100,000 or imprisoned for up to three years.

New Zealand's bank notes have effective security features that should
allow people to readily identify forged notes. Genuine notes are made of
polymer (a plastic) which has a smoother, "shinier" feel than paper.
Each note has two transparent windows. The oval window includes embossed
numbers of the value of the note, e.g., "50" for a $50 note as
illustrated below (this appears darker in the picture than in reality). If a
note is held to the light then you can see a "shadow image" of the
Queen just to the right of the portrait on each note. More detailed
information about security features can be found on the Reserve Bank's
website.

Figure 1: Embossed window:

The normal way of measuring the level of counterfeiting around the world is
to calculate the number of counterfeits found in a year divided by the number of
bank notes in circulation. To relate this measure to everyday experience, a
person who uses cash to make transactions might receive five bank notes as
change in a typical week, or 250 notes each year. The current rate of
counterfeiting in New Zealand is just below one per million notes in
circulation. So a person like this would only receive a counterfeit about once
every 4,000 years!

In reality, most counterfeits are passed by criminals at retail outlets.
Busy supermarkets, fast food outlets and bars are commonly targeted. A
shopkeeper who might receive thousands of bank notes each year would have a much
higher chance of being offered a forged note as payment. But care should still
be taken by everyone.

The introduction of polymer bank notes in New Zealand in 1999 reduced the
rate of counterfeiting to a very low level as illustrated in the chart
below.

Figure 2: Counterfeits detected per million notes in
circulation:

Note: The counterfeits detected in 2000 and 2001 were virtually all from the
paper series.

The transparent windows in polymer notes have been difficult for
counterfeiters to replicate and simple for members of the general public to
check. This has contributed significantly to the fall in the rate of
counterfeiting in New Zealand to about 1 per million notes. Some major
currencies have counterfeiting rates between 50 and 80. Rates in some small
European countries that have their own currencies are closer to New Zealand,
often being between 1 and 10.

The Reserve Bank's Museum displays examples of some counterfeit bank
notes found in New Zealand, as well as examples of many other New Zealand notes
and coins.

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